A bigger house is always worth more, right? It’s really easy to fall into the trap of believing that, but it’s not always true. Let’s talk about it.

Myth: Extra square footage is always worth more.

1) Single story vs two story: Sometimes a large single story will sell for more than a larger two-story. This isn’t always the case, but in some neighborhoods we see this dynamic. So just because a 2-story is larger doesn’t mean it’s more valuable (or a good comp).

2) 55+ Community: In a 55+ community we sometimes see more emphasis on floorplan instead of square footage. Larger models still likely command higher prices, but at the same time the market doesn’t seem as sensitive to square footage differences like we see in other neighborhoods. For example, here are two models in Sun City Lincoln Hills with a 107 sq ft difference. Normally that might not mean much in a typical neighborhood, but it looks like there’s a pretty decent value difference here. On paper it seems like these two models could be perfect comps since they are so close in size, but that might not be the case.

3) Layout: At times a house with a better layout will sell on par with a larger house with a less desirable layout (even outside a 55+ community). What I mean is buyers might pay the same for a 1,400 sq ft house with an open layout compared to a 1,700 sq ft house with a less open floorplan. This dynamic isn’t always easy to spot in MLS photos, and that’s why it’s so important for agents and appraisers to communicate. I recommend agents to open up conversation with appraisers about the listing (without pressuring to “hit the number”). What feedback did you get from potential buyers? What were buyers attracted to? Is there anything special about the house or neighborhood? When it comes to layout, this is often an “insider detail” that’s frankly easy to miss, so I can’t emphasize how important it is to communicate about this if it’s a relevant factor.

4) Dangerous to always adjust: It’s easy to get trigger-happy about making value adjustments whenever we see a square footage difference. Can you relate? But sometimes a square footage adjustment might not be needed. My advice? Be careful about always giving an adjustment and be cautious to not routinely give the same exact adjustment too. Try to look to the market to see if there should be an adjustment or not, and then proceed.

I hope this was interesting or helpful.

Questions: What point stands out to you the most? Anything else to add? I’d love to hear your take.

If you can tell it’s a DIY job, that’s probably a bad thing. Let’s talk about what happens when we spot a lack of quality in home improvements.

1) Technically remodeled: A home might technically be “remodeled”, but if the work is low in quality it probably won’t compete with other truly remodeled homes. This is where photos can be deceptive because a home can look incredible online because lipstick was put on a pig so to speak, but when you see something in person it can make all the difference. On a side note, if you are selling a house and know a potential comp down the street had some quality issues, there is nothing wrong with letting the appraiser know about that so the appraiser can follow-up.

2) A closer look: When something looks off in a house, it’s like an invitation to start looking at other details more closely. I recall a high-end flip where the front door was not installed correctly. In my mind it was such a bad move because it was the very first thing anybody noticed, and as an appraiser it certainly caused me to question the quality of the rest of the work. I ended up looking more closely, observing some repairs that were needed, and I made the value in the report subject to some of the details being properly finished.

3) DIY: I’m all about doing it yourself, but if you can tell it’s a DIY job, that means there is a quality issue. You never want someone to think, “It’s so obvious someone who was not a contractor did this.” The danger is we think we can remodel anything after a few YouTube videos and binge-watching HGTV. Maybe we can, but let’s remember some things are better left to the professionals.

4) Value issue: The market knows how to sniff out a lack of quality, which means if a house has too many issues it’s likely buyers will pay less or even pass. On the appraisal side of things when I see a shoddy install of floors throughout a house, I have to take that into consideration in the final value. I probably won’t give some sort of floor adjustment, but if quality is clearly low and I’m convinced it means something to the market, I can always look at a reasonable range of value for the house and choose to bring in the value a little lower in this range.

5) Cost-to-cure: At times when I see a lack of quality in improvements I tally up a list of what it will cost to cure any issues. My sense is buyers do this when making a purchase, so it’s prudent for me to do it also as an appraiser (I’d rely on a contractor bid for the big stuff). For example, on a recent appraisal I tallied items that were standing out such as a shoddy deck that needed removal, doors that needed to be re-painted, baseboards and moulding that needed caulking, and kitchen floor that needed replacing. Buyers can be forgiving with a couple minor issues here and there, but when things really start to add up they’ll probably pay less. In this case I was noticing projects that were not finished, not done well, or needed to be removed altogether, and I had to consider the cost to make these things right. In photos this house would look amazing, but when walking through the details were off, and that’s exactly why it didn’t make sense for the value to be reconciled to the very top of the market. In this case the home needed about 15K in work to fine tune some of the details, and I had to take that into consideration in my appraisal.

I hope this was interesting or helpful.

THINK LIKE AN APPRAISER CLASS: I’m doing my favorite class at SAR tomorrow called “How to think like an appraiser“. It’s from 9-12pm on June 1st. We’ll talk about comps, adjustments, value, etc… It’ll be fun. You’re invited.

Questions: Any stories to share about a lack of quality? What point stands out to you the most? I’d love to hear your take.

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